Our latest Powerhouse report analyses the UK economy’s recovery as COVID restrictions lifted at the start of FY 2021. But is your business ready to make the most of the upturn? Keep reading to learn the five key disruptors you should plan for now to stay ahead of the competition.
Businesses across the world have faced unprecedented disruption over the last 12 months. You don’t need us to tell you that.
Thankfully change is in the air.
Our regular Powerhouse report, produced with the Centre for Economic and Business Research (Cebr), analyses regional economic trends in cities around the UK. For our latest Autumn/Winter 2021 report, recovery is the key trend we’ve highlighted across the country.
GDP did decrease by 1.4% in Q1 2021, but output grew by 5.5% in Q2 after COVID restrictions lifted. Sectors like construction, accommodation, food services and education have all seen particularly strong GVA growth.
And we’re glad to see that unemployment is moving back towards normal levels after peaking last year.
Read our Powerhouse report for the full economic data for your city
But as economies reopen from coronavirus lockdown, it’s clear that many disruptors remain. It’s the businesses which can use these disruptors as opportunities for innovation that will succeed into 2022 and beyond.
Working with the CBI, we’ve listed the five most important disruptors that you need to know about, with advice for your business’s next moves.
- Staff shortages
- Supply chain issues
- Economic outlook
- The rise of innovators.
“While we’re experiencing unparalleled levels of disruption to traditional business practices, there’s much to be gained for those that embrace these shocks. Innovation is key to achieving this successfully and strategically, and we look forward to continuing to support our members as they chart their path through these unprecedented times.” - Vanessa O'Donnell, CBI Senior Policy Adviser
1. Staff Shortages
It’s a world-wide phenomenon that’s already been dubbed ‘The Great Resignation’. Up to 40% of employees are likely to move jobs in 2022 if they don’t feel valued, engaged, and looked after.
And UK businesses are suffering even worse from staff shortages due to the end of freedom of movement with Europe after Brexit.
The manufacturing sector is particularly affected. Output was at an eight-month low in October 2021 even though orders were up. Vacancies in the sector are currently 79% higher than before the pandemic and it’s clear that solving the staffing issue will be vital to restoring output.
What’s the solution? Employment law partner Jenny Arrowsmith says that employers need to work hard to understand what their employees actually want.
“Businesses are competing against each other to fill vacancies, and you need to think carefully about what your organisation can offer that others don't,” she says.
“Attracting staff isn't just about the amount you pay them. Ask yourself, what other benefits do you offer? Those offering work/life balance or flexibility are particularly attractive – hybrid working or supportive policies through ‘life's ups and downs’ that will necessarily impact staff at some point. Wellbeing support remains important, as does health and time off from work.”
Read the Powerhouse Report for more tips on solving staff shortages
2. Supply Chain Issues
This is one disruptor that’s been very much in the public eye. As well as the empty supermarket shelves making headlines, supply chain issues have hit manufacturers and retailers of all shapes and sizes.
The global semiconductor chip shortage is one factor. Even household names such as Jaguar Land Rover and Ford have had to completely shut down production this year due to chip supply.
Again, the UK has been hit worse than many other countries due to a combination of issues. With 100,000 fewer HGV drivers than we need on the roads, the last leg of our supply chain is disrupted even further.
And more supply chain issues could be ahead, with protectionist policies impacting import and export, and ESG playing a bigger role in procurement strategy.
Real Estate partner Michelle Beaumont has seen how these issues have affected the property sector.
“Tenderers are coming back with longer lead-in times, and costs are increasing. Developers are having to factor this into their commercial contracts. For instance, where a developer has an obligation to commence on site by a certain date, these dates are being pushed out and developers are having to approach contractors to tee them up ahead of contractual commitments."
“Perhaps a way to avoid some of these issues to use modern methods of construction (MMC) where buildings, machinery and equipment are prefabricated in a factory environment and then assembled on site.”
Learn more about supply chain disruption in the Powerhouse Report
3. Economic Outlook
Our report has shown some recovery for the UK economy in recent months, but the overall picture is still uncertain.
Between new coronavirus variants, fuel shortages and inflation, consumer confidence has gone down for three months straight. The GfK Consumer Confidence Index was at -17 in October 2021.
Even some positive signs have come with a downside – such as rising house prices leading to reduced growth for the real estate sector.
But Faye Bargery, corporate law partner, sees opportunity in innovation.
“With businesses fighting for every consumer pound spent, we’re likely to see an increase in innovation and adaptation as companies seek to make their offering the most attractive on the market. The rise of ‘experiential’ consumer businesses has led that drive, from the use of virtual reality to Instagrammable pop-up shops and bars.”
“Being able to deliver your promises is key for consumer companies. Often that means getting your delivery process right – quite literally. Consumers expect to receive what they’ve ordered in record time, with many large organisations offering next-day or even same-day delivery as standard. That means having a slick logistics operations, and using technology to create efficiencies and speed up the process.”
Read Faye’s advice in full in our Powerhouse Report
Even now the full economic consequences of Brexit are unclear.
Fewer jobs and businesses in the financial and insurance activities sector have moved abroad than some originally feared. But the country’s GDP could still lose £2.2 billion a year from the sector according to a recent Cebr report.
Our Head of International, Bryan Bletso, sees opportunity as well as risk.
The Autumn Budget has cut the bank surcharge to try and help the UK financial sector remain competitive. The new ‘Made in the UK, Sold to the World’ export strategy promises to help both service providers and manufacturers trade abroad.
“The problems associated with non-tariff barriers and bureaucracy are well-documented, but Brexit also provides regulatory autonomy,” says Bryan.
“The introduction of Freeports, new trade deals with global markets such as Singapore, India, Japan, Australia, New Zealand and Canada, and the success of the COVID-19 vaccine rollout means businesses remain keen to invest into the UK and use it as a key landing point for access to trade across the rest of the word.”
Explore Brexit opportunities for your business in our Powerhouse Report
5. The Rise of Innovators
Coronavirus lockdowns have forced change and innovation at a rapid pace. Those that could adapt have thrived, and those that could not have struggled.
We’ve seen household brands such as Topshop and Debenhams disappear from the high street as consumers switch to online retail. But we’ve also seen fintech start-ups such as Monzo and Starling Bank succeed under new circumstances.
Consumer expectations have likely changed forever and businesses need to change with them if they’re going to compete against the innovators. Technology, automation and digital investment is a top strategic priority for 77% of senior leaders within UK financial institutions in 2022.
However, Banking & Finance partner Sean Scott advises caution alongside innovation.
“As they experience growth, fintechs must remain aware of the challenges posed by regulation.”
“As we’ve seen in Europe, and recently in the UK with the Financial Conduct Authority, regulators will scrutinise these emerging market disruptors and the risk of shortcomings in their governance. It’s important to bear in mind that identifying regulatory compliance will remain an important consideration.”
Read the Powerhouse Report for more insight into overcoming disruption through innovation
Want to learn more about how our lawyers can help your business innovate and survive disruption? Get in touch today